Weekly Market Commentary: Stocks post weekly gain despite early week rout

Published On: December 25, 2020 08:00 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Dec 25: The Nepal Stock Exchange (Nepse) index extended its losses from the week earlier fueled by the political turmoil on Sunday. The benchmark tanked almost 100 points in Sunday’s session but the stock market found a firm footing after witnessing a sharp rebound on Monday. After falling almost 60 points, the index ended Monday with a 30-point advance. The strength carried over to Tuesday’s trading with the index rallying over 95 points. The momentum subsided slightly as the market witnessed a gain of seven points on Wednesday followed by a 30 point’s decline on Thursday. Consequently, the index registered a weekly gain of 6.11 or 0.30% points to settle at 2038.63.

Despite the political unrest seen after the prime minister decided to dissolve parliament in the week, investors betting on the equity market to stretch the upward trend further has led to a decent recovery after Sunday’s rout. With the developments in the political scenario likely to affect the bourse’s movement, a consolidation between 1,900-2,100 range can be expected. The weekly turnover stood close to Rs 35 billion against Rs 30 billion in the week earlier.

Class ‘A’ stocks also inched higher with the Sensitive Index climbing 0.21%. Sectors ended mixed. Gains were led by bellwether commercial banks. The Banking sub-index shot up 3.63% in the week led by few commercial bank heavyweights. The Life Insurance sub-index also saw strength and rose 3.36%. Hotels and Manufacturing & Processing sectors posted weekly advances of 1% each. On the other hand, ‘Others’ sub-index suffered 5.71% decline followed by Microfinance group which lost 3.93%. Hydropower stocks also struggled and fell 2.65% on average. All other sub-indices ended marginally in red.

Shares of Nepal Life Insurance Company Ltd were traded the most as the largest life insurer by market capitalization announced its much-anticipated dividend for the year 18/19. Rs. 4.7 billion worth of its shares were exchanged as the insurer announced a total dividend of 51% including 31% bonus shares and 20% cash dividend. NIC Asia Bank Ltd and Nepal Reinsurance Company Ltd’s shares were also heavily traded with turnovers of over Rs. 2 billion each. Nabil Bank Ltd witnessed a total turnover of Rs. 1.7 billion. The commercial bank declared 33.5% bonus shares in the week along with 1.76% cash dividend for tax purposes.

On the technical front, the equity index formed a doji candlestick with long wicks towards either side, which indicates indecision and volatility prevailing in the review period. With the index trading close to its all-time high resistance at around 2,100 point’s mark, investors are better off approaching the market with caution as a clarity of direction is yet to be seen. While there is a possibility of correction or consolidation in the current scenario, a breach of 2,100 points with heavy volumes will point towards extension of the overall uptrend further. Support for the market lies around 1,900’s level.

This column is produced by ARKS Capital Advisors Ltd.


(Views expressed in the article are those of the producer and do not necessarily reflect those of this publication)

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